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Contribution of the Unorganised Sector to GDP

FOCUS

The report submitted by the sub-committee explains the alternative method for estimating the contribution of unorganised/informal sector to GDP. “The task of the Sub-committee was to review the existing methodologies and suggest measures to facilitate direct estimation. The Group reviewed the 'Labour input method' contained in an OECD publication titled 'Measuring the Non-Observed Economy - A Handbook' and the 'Method of Apportioning' proposed by Shri Ramesh Kolli and Suvendu Hazra in a paper presented in the Eighth meeting of the 'Delhi Group'. Given the existing data systems in the country, it is not found feasible to use the 'Labour Input Method' unless substantial improvements are made in the statistical system of the country.”

The sub-committee in the review found that “though, it would be necessary to introduce such improvements in the statistical system, realistic estimates need to be generated in the interim-period. The Sub-committee, thus, developed an alternative method of apportioning by using estimates of labour inputs and productivity differentials of both the organised and unorganised sectors. According to the estimates worked out by the Sub-committee by using the modified apportioning method, about 50 percent of the GDP was contributed by the unorganised/informal sector in 2004-05.”

FACTOIDS

In the book titled ‘Measuring the Nonobserved Economy – A Handbook’ by OECD (2002), the Labour Input Method the estimated labour input in each industry group is multiplied by the corresponding Gross Value Added (GVA) per unit of labour.

Shri Ramesh Kolli and Shri Suvendu Hazra of the CSO estimated the share of informal sector (as distinguished from unrorganised sector) in the Net Domestic Product (NDP) by apportioning the estimated unorganized sector NDP as put out by the CSO in their NAS estimates by using a method of apportioning.

Kolli and Hazra estimated the contribution of informal sector to net domestic product (NDP)as 47.7% for the year 2001-02, though the conventional estimates of the unorganised sector was 58.5 per cent.

Under the Modified Method of Apportioning (the approach of the Sub-committee) both the employment shares and productivity differences as revealed by various surveys are used for apportioning of GDP estimates relating to each tabulation category as computed by the Central Statistical Organisation (CSO).

The modified apportioning method ‘is an improvement over other existing methods as it is consistent with the NCEUS definition and takes into account both employment and productivity differentials.

In the estimates of GDP by economic activity for the year 1999-2000, according to the new series and the 1993-94 series, the level of GDP has gone up by Rs. 30,454 crore or 1.7 per cent, in the new series in 1999-2000.

Under the new methodology, the estimates of GDP from the unregistered manufacturing sector for the base year 1999-2000 stands at Rs. 91,110 crore as against Rs. 95,882 crore estimated in the old series.

The estimated GVA in respect of private communication sebsector stands revised at Rs. 4,593 crore in the new series as against Rs. 1,752 crore.

The estimates of GVA from real estate, ownership of dwellings for the year 1999-2000 are Rs. 10,568 crore and Rs. 10,819 crore in the old and new series, respectively.

AUTHOR

National Commission for Enterprises in the Unorganised Sector, New Delhi